Failed deliveries cost industry US$2bn each year – what can be done about it? Matthew Robertson, Co-CEO at NetDespatch, explores the issue
Research by online retail association IMRG and parcel data management platform NetDespatch quantified the cost of failed online retail deliveries for industry, looking at the financial impact for the three main groups involved – shoppers, retailers and carriers. While there may be any number of reasons as to why a customer’s home delivery expectations may not be met, this research focused on the four most common delivery failure scenarios:
1. Failed first delivery – re-delivery required
2. Failed first delivery – collection by customer
3. Late delivery – not within the expected time window
4. Order lost – replacement sent
IMRG and NetDespatch estimated the cost of failed first-time, on-time, every-time delivery for all three groups combined to be more than £1.6bn (US$2bn) in 2018.
Have failed delivery rates improved?
Statistically-speaking, the answer is yes, but the actual picture is more complex. In the IMRG-MetaPack UK Delivery Index, one of the metrics tracked is the level of attempted [or carded] delivery. In 2014 this averaged 4.65%. The rolling average over the most recent 12 months [March 2018 to February 2019] is 2.77% – a substantial improvement.
A core reason for this improvement is likely to be related to the introduction of new solutions over the intervening years. There is of course always a lag between solutions coming to market and adoption by retailers/customers but, as time moves on, the ones that gain traction can start to enhance efficiency and the customer experience.
Some of the most important improvements have enabled greater visibility of order movements and more dynamic control of delivery operations, meaning delivery times can now be more accurately predicted and communicated to the customer. In some cases, customers also have the option to defer delivery to a more convenient time or place and, of course, use of alternative click and collect locations has become far more popular.
In spite of such innovations and technologies, the cost of failed ‘first-time, on-time, every-time’ delivery remains high because shopper expectations tend to increase in line with – or, in many cases, faster than) – retailer adoption of them.
The move toward faster delivery
One of the main challenges with delivery is that it has sped up considerably in recent years. Whether this is something that people specifically want – or is something they are being told they can have – is a moot point, but the shift is clear to see.
In the IMRG-MetaPack index, the percentage of orders being sent specified-day/next-day has increased from 43.9% of all UK-delivered volume in July 2016 to 50.2% in July 2018. That might not sound like much, but it means carriers were expected to deliver about 580 million next-day deliveries in 2018, compared with 450 million in 2016. This brings challenges because economy services typically allow for a two- to three-day delivery window, with some in-built contingency, while next-day only allows perhaps a 12-hour delivery window, with very little available contingency.
How can the risk of failed delivery be reduced?
Here are three possible focus areas for how the risk of failed deliveries could be reduced:
1. Encourage collection over receipt
In the UK, we have a culture of home delivery; almost 80% of respondents to a survey IMRG ran in 2018 with GFS and maru/EDR said that home was their preferred delivery location. The main issue with this is that most people are not at home during the day, when their deliveries are likely to arrive.
The pressure to deliver on-time in line with expectation means a portion of parcels are fulfilled to a ‘safe space’; some are elected by the customer, but in many cases this means it has been left with a neighbor. This may technically reduce failed deliveries, but it’s also quite annoying for people to have to continually apologize to their neighbors for taking their parcels in. From the perspective of customer experience, it cannot be considered a long-term solution.
Connecting people to their parcel is the aim of delivery; incentivizing greater use of click-and-collect so customers are more focused on collecting rather than receiving their orders – and hence have more control over the process – may provide opportunities to reduce failed deliveries. This would require the evolution of the click-and-collect infrastructure, but the benefits seem to support it.
2. In-transit data
Another solution would be greater adoption and use of in-transit data, so customers have clear visibility of where their orders are – probably supported by text message updates at key points – and increase their chances of being available – or having someone available – to accept receipt of the parcel at the exact moment of delivery.
While WISMO [where is my order] functionality is not yet widely adopted, it does seem an inevitable route down which technology may develop, becoming cheaper to implement and offer over time.
3. Putting the customer in control of their delivery
Instead of automatically giving customers a next-day delivery option, retailers need to make the customer the center of the delivery process. One way of doing this is allowing customers to be able to choose their own delivery window. If customers are able to choose their desired time window for their delivery, it automatically makes the delivery process more convenient for them and can potentially reduce the risk of a failed first-time delivery.
From the point of order through to the fulfillment lifecycle, regular communication between the customer and the courier is key to increase the chances of a successful first-time delivery. This is because the customer can ensure that they are at home during their requested time slot, or if their plans change, they are able to notify the courier and update their preference for a different delivery slot.
About the author
Matthew Robertson is co-CEO at NetDespatch. With a career spanning over 20 years in the general distribution and postal industry, Robertson was instrumental in the adoption and implementation of NetDespatch in the Packets and Parcels division at TNT Post in his three years as group development director. He was also instrumental in the adoption and implementation of NetDespatch in the Packets and Parcels division of the leading alternative B2C postal service. Robertson has also held senior positions at Arla Foods and a leading role in market development for B2C packets within Royal Mail. Robertson is recognized as an industry leader with a strong commercial presence and provides a key link between NetDespatch clients and the business.